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Peter Schiff: It’s Not Just the Stock Market; It’s the Economy

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There was no Santa Clause rally on Christmas Eve. Instead, US stock markets continued to tank. The Dow Jones dropped 653 points. The S&P 500 fell another 2.7% and officially entered into bear territory. It was the worst Christmas Eve’s on Wall Street in history. The Washington Post put it in stark terms.

By the end of Monday’s shortened holiday trading session, the great bull market that began in the lows of March 2009 lay lifeless, capping a three-week, 16 percent sell-off of the S&P 500.”

As Peter Schiff put it, “The Grinch stole the Santa Clause rally.”

It’s now official. Wall Street can stop pretending that it’s a correction. They have to admit that it’s a bear market.”

Interestingly, there is still quite a bit of complacency. Peter said he doesn’t really see investors panicking-  yet.

I do think people are a little worried about the market now, but they’re not worried about the overall economy. They still don’t get it. They still haven’t connected the dots between the stock market and the economy.”

Peter said this is not just your run-of-the-mill bear market.

Most people, if I listen to these experts talk about it, ‘OK, it’s a bear market. Oh, been there, done that. No big deal. Yes, we’ve had bear markets before but hey, it’s an opportunity to buy stocks.’  … People still think it’s a regular bear market. It’s not.”

What makes this bear market different is the bull market that preceded it. Not only was it the longest bull market in history, it’s the first bull market totally created by the Federal Reserve.

This is the mania that the Fed built. And it was built on quantitative easing, which we have never done before, zero percent interest rates, which we never had before. And not only was this a stock market entirely built by monetary policy, but this was probably the first time the entire economy has rested on the foundation of that stock market bubble. This was all about the market, about confidence, about the wealth effect. And so when this bull market ends, this phony recovery that was built on that phony foundation comes collapsing down.  And people don’t get that yet.”

This is not just the stock market going down. The economy is going into recession, and the bubble has grown for so long and gotten so big, nobody realizes it has popped.

When you are in a bubble and don’t recognize that you are in a bubble you never know that the bubble has popped. You don’t see any of the signs because you don’t even know to look for the signs. And all you do is try to rationalize what’s going on and try to minimize the significance. But when the Fed does come back with QE and zero percent rates, initially it will be heralded as good news …  No! Because this time it isn’t going to work. As soon as they do that, the dollar’s decline is going to turn into a rout. Gold’s rally is going to turn into a rocket ship up. And the economy is not going to recover. It’s going to sink. We’ll go from recession to stagflation.”

Peter goes on to talk about the political ramifications. He said in the end, Trump is going to come out looking a lot like Jimmy Carter.

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